News: Lockdown effect: Restaurants, cinemas & retailers at malls seek zero rentals till May-03-04-2020
Updated On: Apr 03, 2020
The ₹4.2 lakh crore restaurant industry, which employs over seven million people, is staring at store closures, job losses, and significant erosion of profits and revenue because of the lockdown and social distancing norms. Force majeure refers to rare and unanticipated events, beyond the control of the concerned party that prevents him from fulfilling a contract.
New Delhi | Kolkata: India’s largest restaurant chains, retailers and multiplexes including McDonald’s, Jubilant FoodWorks-operated Domino’s Pizza, Speciality RestaurantsNSE 2.66 %, Reliance Retail, Future Group, Spencer’s Retail and PVR have written individually to mall owners invoking the force majeure clause and have sought waiver of rentals up till May amid the lockdown. They have cited zero revenues in the immediate term and a drop of at least 50% in revenues for several months to come. Small businesses in malls have also made similar demands.
Force majeure refers to rare and unanticipated events, beyond the control of the concerned party that prevents him from fulfilling a contract. Typically, this clause can be invoked only if it is specified in the original contract.
The ₹4.2 lakh crore restaurant industry, which employs over seven million people, is staring at store closures, job losses, and significant erosion of profits and revenue because of the lockdown and social distancing norms.
“Yes, we have written to the owners of the premises seeking waiver of lease rent from March till at least May 2020. With likelihood of improvement being remote for several months, support from owners is very crucial for survival; it is most critical to manage cash flow and staff salaries,” said Anjan Chatterjee, founder of Speciality Restaurants.
Some Have Announced Waivers
The group operates outlets such as Mainland China and Oh! Calcutta.
Rent and staff costs account for over half of overall expenses of retailers and restaurants. “We are working with long-term partners to find mutually beneficial solutions. We’re confident the business will bounce back as soon as normalcy resumes,” a spokesperson for Westlife Development subsidiary Hardcastle Restaurants, which operates over 300 McDonald’s restaurants in west and south India, said.
Chinese cuisine chain Big Wong Hospitality director Rajan Chanana said his chain had asked the landlords to waive off the rent for now and recalibrate for the future. “We are down to zero revenues,” he said.
Spokespersons for Reliance Retail, Future Group, Spencer's Retail and Jubilant FoodWorks declined to comment on the matter. Some malls have already announced rent waivers. These include Lulu Mall in Kochi; Forum Mall in Mangalore, Mysore, Chennai, and Hyderabad; and Xperia in Mumbai.
Officials at other malls said they are working with tenants to find a middle ground. “We have strong relationships with our business partners and will work with them in our best mutual interest. This is a time for patience and forbearance from all concerned stakeholders,” said Pushpa Bector, executive director, DLF Shopping Malls.
New Delhi’s Select Citywalk Mall executive director Yogeshwar Sharma said it would be “pre-mature” to arrive at any conclusion as they don’t yet know the full extent of the problem. “Even the definition of force majeure does not cover this pandemic as no one anticipated such an event,” he said.
Multiplexes including PVR, Inox Leisure, Cinepolis India and Carnival Cinemas too have invoked force majeure to suspend rentals on leased properties. Rental is the biggest fixed cost for the multiplexes, which ranges between 15-20% of revenues.
“Revenues have fallen to nil so paying rentals is not going to make any sense. We are talking to mall owners and have received positive response,” a top executive at one of the cinema chains said.
Officials representing two grocery chains said they have asked for a waiver where stores are shut, and reduction in rentals where stores are partially operational.
The force majeure clause has been invoked by auto giants as well. Eicher Motors, the maker of Royal Enfield motorcycle has declared a ‘force majeure’ and suspended any or all contractual obligations. The country’s largest two-wheeler maker Hero MotoCorp informed its vendors last week that it is invoking force majeure to suspend full payments to vendors, since it has “no visibility of receivables”, with sales having come to a standstill. The company told vendors that bill discounting facilities have been withdrawn effective immediately. It initially said 25% of payment will be made to large vendors, which has now been increased to 50%.
